Primary Bank, which celebrated its grand opening Friday as the first new New Hampshire bank in seven years, expects to build three additional branches and reach at least $300 million in assets in the...

Mike Cote's Business Editor's Notebook: Save more, spend less

MIKE COTE

For 45 years, Dee Lee never had to worry about losing power for more than a few hours at her family's home in Harvard, Mass. But after going without electricity for a week after the December 2008 ice storm and again last year after the Halloween Nor'easter, she figured it was time to invest in a generator.

She didn't need to fire it up when Hurricane Sandy blew into town a couple of weeks ago, but knowing she had power if she needed it gave her peace of mind.

Lee wants you to think the same way about your finances.

"Everyone needs a go-to-hell fund," says Lee, who will be the keynote speaker Wednesday at the Dollars & Sense Workshop in Derry. "You want to have something to go to so you're not charging your credit card, so you're not taking a loan out against your 401(k) and overdrawing money from your IRA."

That means earmarking money that is specifically designated to be there in case your roof blows off or the creek floods your basement and you're not covered by insurance.

Lee will be sharing her financial wisdom during the 6 to 8:30 p.m. forum at the Stockbridge Theatre at Pinkerton Academy. The event, presented by Parenting NH Magazine, also includes a panel of experts. (Tickets are $20 and available at dollarsandsense2012.eventbrite.com.)

Lee has been teaching people about money management for more than three decades. Her recipe for success is as simple as a diet plan that tells you to eat less and exercise more - and it's just as hard to follow if you're not willing to change your behavior.

"You want to spend less than you earn or earn more than you spend. That sums it all up," says Lee, a financial educator, author and radio talk show host on Boston's WBZ News Radio 1030 AM.

While the economic strife of the last five years has forced many people to exhaust their savings due to layoffs, home value declines and other hardships, Lee believes the extent of the damage has been overblown. Investors who stayed in the game came out OK.

"What happens is some people go in a panic mode, and it gets blown up out of proportion in the media," Lee says.

She cited a 2011 study by Fidelity Investments that reported how 401(k) account holders who kept their equity allocations intact throughout the market declines in 2008 and 2009 have much larger account balances than investors who stopped saving or pulled their money out of the stock market. The study examined nearly 20,500 401(k) plans and more than 11.6 million participants.

"If they hadn't touched their money and hadn't been investing in really exotic stuff, they're probably ahead of where they were when we suffered the recession," Lee says.

By contrast, retirement savers who took all their money out of the stock market between Oct. 1, 2008, and March 31, 2009 - the nadir of the downturn - and never moved money back into equities saw their account balances grow by a mere 2 percent, the study said.

Fidelity reported on Thursday that retirement account balances averaged $75,900 at the end of September, the highest level since the company began tracking the data more than 12 years ago. The average account balance of the 12 million accounts it examined climbed 18 percent from the previous year, when it was $64,300, the Boston-based company said.

If you're in the camp that panicked and hid your money under a mattress for too long or had to live off your savings when you lost your job, don't lose hope, Lee says. No one wants to rebuild, but it's never too late. When you retire, it's not like you're going to spend all your money in one day, she says.

"We're going to live into our 80s and, if we're lucky, into our 90s, so we can start all over. As painful as it is, many people have and are doing it right now. And they don't like it and are angry about it. Nobody wants to lose money."

Nor do they want to change the way they live, which is the key to ensuring financial sercurity. In other words, living within your means and always tucking away part of your paycheck for savings.

"Every decision you make as an adult has a financial component to it. To reach your goals, you're going to have to learn to invest," she says. "You only have so much money, and that is the money you earn unless you win the lottery or inherit a lot. What you have is what you get from your income.

How are you managing that? Money management is probably the most important thing people can learn to do."

Lee catches herself being preachy - do you really need that 40-inch flatscreen TV and couldn't you pack your lunch this week to make up for that expensive restaurant over the weekend?

But she practices what she preaches. Lee drives a 9-year-old Volvo and expects to run it four or five more years. She also finds herself saving for college again, this time for her 6-year-old granddaughter, following the death of her son.

She asks: Rather than buy that new car, why not get the old one detailed, cleaned up and serviced and spare yourself an expensive monthly payment?

"'Well it's only 300 bucks a month for the car. And it's only $200 for this.' Before you know it, you have all this cash going out," Lee says. "If there's a catastrophe - and there will be, nobody gets through life unscathed - you now have all these obligations."

Mortgage, equity line of credit, car loan. Oh, and you just had to get a boat since you live down the road from a lake. Once the bills start piling up, you don't have much left for anything else, much less to put aside for retirement, a college fund and emergencies.

"We may have to start denying ourselves things that we think we rightfully should have," Lee says. "You can have everything - you just can't have it all at once."

Unless you consider peace of mind a luxury not worth the price.

- - - - - - - -

Mike Cote is business editor at the Union Leader. Contact him at 668-4321, ext. 324 or mcote@unionleader.com.